Ford Posts $2.7B Profit; Toyota Struggles With Quality

Detroit News

Dearborn automaker focuses on core; recall pulls competitor off track

It wasn't very long ago that Ford Motor Co. was in the spot Toyota Motor Corp. finds itself now: struggling with recalls, bad publicity and financial losses. Today, the two automakers appear to have switched places.

Ford is on top of the U.S. auto industry. Its laser focus on its North American business and core brands helped the Dearborn automaker generate its first full-year profit since 2005.

After reporting annual net income of $2.7 billion for 2009, Ford Chief Executive Alan Mulally on Thursday predicted the company would earn money again this year, achieving sustainable profitability well ahead of schedule.

Mulally described 2009 as a pivotal year for Ford, the only U.S. automaker to get through a horrendous industry downturn without going bankrupt.

It was a pivotal year for Toyota, too. The Japanese automaker lost money for the first time in 59 years, and expects to lose money this year. Now Toyota is grappling with a pair of damaging recalls involving sudden acceleration that threaten its once sterling reputation for safety, quality and reliability. Even as Toyota said Thursday it is close to a fix for the latest recalled models, Congress called a hearing for Feb. 25.

Toyota's woes may be the result of its push to become the world's biggest automaker. In its quest to overtake General Motors Co. -- which it did in 2008 -- Toyota may have expanded too much and too fast. In a once unimaginable scenario, some of its American customers are nervous when they get behind the wheel of their Toyotas. Toyota says it's doing everything to recapture their confidence.

The industry upsets highlighted this week serve as a reminder that in the auto business, companies can spiral from winners to losers in a very short time -- and recover again.

Ed Whitacre Not One of the 'Car Guys'

Toronto Star

Ed Whitacre doesn't know his way around Detroit.

Literally.

Since U.S. President Barack Obama tapped the impatient Texan as chairman of a crippled General Motors Co. last year – an entreaty Whitacre initially turned down, having just retired from a 17-year career as CEO of telecom giant AT&T Corp. – Whitacre has had to learn the pronunciation of main streets like Gratiot Ave. (it's "Grashet") and ask directions within the Renaissance Center (RenCen), the ominous-looking cluster of silo towers on Detroit's waterfront that GM calls home.

The spirit of GM lifers was not lifted by the arrival of Whitacre, a carpetbagger from San Antonio, who promptly made the wrong kind of headlines by saying, almost defiantly, "I don't know anything about cars. A business is a business, and I think I can learn about cars. I'm not that old (he's 67), and I think the business principles are the same."

Whitacre, whose board appointed him CEO on Monday, seemed not to appreciate that in Detroit, perhaps even more than Toyota City, Stuttgart and Wolfsburg, "car guys" are revered. As of Monday, and for the first time in its history as one of the world's oldest and biggest automaking jurisdictions, Detroit's auto sector is now run entirely by outsiders to the industry and to Michigan.

Then again, it was the veteran "car guys" who presided over the decades-long decline of Detroit, culminating in last year's bankruptcy of Chrysler Group LLC and GM, which as recently as the 1980s could boast a North American market share of about 50 per cent. Among the Detroit Three, that fate was avoided only by Ford Motor Co., run since 2006 by outsider Alan Mulally, a recruit from Boeing Co.

GM can only wish it had benefited from a CEO track record to match that of Whitacre, son of a locomotive engineer who transformed Southwestern Bell, the smallest of the so-called Baby Bells created in the 1980s with the breakup of AT&T, into an industry consolidator with a market value of $244 billion (U.S.) when Whitacre retired in 2007.

From the start last summer, a hard-charging Whitacre did not act like a typical overseer chairman. By December, the Whitacre-led GM board had ousted Fritz Henderson, the GM-lifer who had replaced Rick Wagoner, himself ousted earlier in the year by Obama's auto-industry task force. Whitacre had reversed Henderson's plan to sell GM Europe, a huge operation anchored by Adam Opel GmbH, to a consortium led by Aurora-based Magna International Inc.

There was little in Whitacre's GM tenure to suggest he was much interested in replacing Henderson with anyone but himself. Too many of GM's major decisions were being made by its chairman and not its CEO for Monday's outcome to be much of a surprise.

Indeed, Whitacre had become so much larger-than-life a figure at GM that it was difficult to imagine GM finding a replacement for Henderson willing to work with a chairman so given to second-guessing his ostensible CEO.

Having stymied Frank Stronach's ambitions at Opel, Whitacre then paid off Opel's loans to Germany ahead of schedule. He has vowed to make GM profitable in 2010, also ahead of schedule; to pay back $6.7 billion (U.S.) in loans to Uncle Sam; and take GM public again as early as this year so taxpayers can cash out and GM can shed its "Government Motors" stigma.

Whitacre has greenlighted increased production at Oshawa, one of GM's crown jewels. And he bought out joint-venture partner Suzuki Motor Corp.'s half-interest in the CAMI facility in Ingersoll, Ont. He's also pushing GM engineers to move up the debut of what GM hopes will be a game-changing electric-drive Chevy Volt to late September from later in the year.

What GM has long needed, and now has in Whitacre, is a take-no-prisoners CEO who will display the heads of executives who fail to meet profit goals on pikes outside RenCen. If GM is to have a future, its history of over-promising and under-delivering on everything from market share to quality improvements must be relegated to the past. Judging from his brief but eventful tenure at GM so far, the Whitacre sense of urgency is GM's best shot at restoring the firm's intimidating leadership role of the 1950s, when friend and foe alike bowed to "The General."

Dealers Swamped by Worried Toyota Drivers

AP

Toyota dealers across the country were swamped with calls Wednesday from concerned drivers but had few answers a day after the company announced it would stop selling and building eight models because of faulty gas pedals.

Toyota insisted the problem - sudden, uncontrolled acceleration - was "rare and infrequent" and said dealers should deal with customers "on a case-by-case basis." But drivers of Toyotas and those who share the road with them were left with uncertainty.

In an unprecedented move, the company said late Tuesday it would halt sales for the eight models - which make up more than half of Toyota's U.S. sales volume - to fix the gas pedals. Last week, Toyota issued a recall for the same eight models, affecting 2.3 million vehicles.

A private firm said it had identified 275 crashes and 18 deaths because of sudden, uncontrollable acceleration in Toyotas since 1999.

In North Palm Beach, Fla., Clare Roden showed up at a Toyota dealership worried about the 2010 Camry she purchased recently. She was relieved when she was told her accelerator was not a problem part.

"I didn't want to get out on I-95 because people are not very safe drivers there anyway," Roden said as she waited in the lobby while mechanics checked her car. "I wanted to get it down here as soon as possible."

The dealership owner, Earl Stewart, said about half his cars are affected by the recall, a huge hit to business. He said customers had been flocking in with concerns about the accelerator on all of the models. He sent some home with loaners.

"They're very frightened," he said. "Many people are concerned their accelerator pedal is going to stick and they're going to be involved in an accident."

At Walser Toyota in Bloomington, Minn., owner Doug Sprinthall took calls all day Wednesday from people wanting to know if cars they once thought were dependable were affected by the freeze. He didn't have much to tell them.

"It's hurry up and wait," he said. "We've got a lot of faith in Toyota. They're a good company. These things are not unheard of. ... What's different about this is it's just so many vehicles."

Toyota has said the problem appears to be related to the buildup of condensation on sliding surfaces in the accelerator system that help drivers push down or release the gas pedal. The gas pedal mechanism can wear down, causing the accelerator to become harder to press, slower to spring back or stuck.

Outside safety experts say it could also have to do with the complicated electronic sensors that relay the message from the gas pedal to the engine, the design and location of the sensor system and a lack of an override mechanism.

Transportation Secretary Ray LaHood told WGN Radio in Chicago the government had urged Toyota to stop making the cars while it investigated the problem.

The sales and production halt involves some of Toyota's best-known lines, including the Camry and Corolla sedans and the RAV4 crossover, a blend of an SUV and a car. RAV4's sales surged last month.

In addition, the problem could spread to Europe, where a similar accelerator part is being used, said Toyota spokeswoman Ririko Takeuchi. She declined to give the number of cars affected. The company was studying possible responses there, including a recall.

Toyota had little to say about how common the problem is.

"It's rare," Toyota spokesman Brian Lyons said. "I'd like to say even more than that but right now I'm held to rare, rare and infrequent."

Asked whether the problem was worse for older cars, he said: "There's so many factors involved. That's why we're a little careful with our words here. We are finding it in some lower mileage vehicles depending on the environmental conditions."

Compounding Toyota's problems, the carmaker said late Wednesday it will recall an additional 1.09 million vehicles in the United States due to the risk of floor mats interfering with accelerator pedals. Toyota has already recalled 4.26 million vehicles in the U.S. over the floor mat problems.

Sean Kane, director of Safety Research and Strategies, a consumer group that conducts research into motor vehicle safety issues, said his firm has identified 2,274 incidents of sudden unintended acceleration in Toyota vehicles leading to at least 275 crashes and 18 deaths since 1999.

The firm cites as sources the National Highway and Traffic Safety Administration, direct reports from drivers and incidents mentioned in lawsuits. Toyota would not confirm the numbers.

The supplier of the gas pedals used in the recalled car and trucks, CTS Corp. of Elkhart, Ind., said it knew of only a few cases of drivers having problems with accelerators. It said it's working with Toyota to design a new pedal.

Safety experts said drivers should watch for warning signs, such as when the act of pressing the gas pedal starts to feel rougher or when the pedal does not fully return to its regular position.

"If you don't have that problem, I would probably say it's probably fine to keep driving your Toyota because this really only happens in rare instances," said Rik Paul, automotive editor at Consumer Reports. "If you do experience any roughness in the accelerator pedal, don't drive it any more and take it to your dealership."

Consumer Reports testers found the best thing to do is to hit the brake hard and hold it firmly, then shift into neutral and steer the car off the road. Drivers should not pump the brake, Paul said.

The fallout for Toyota was nearly immediate. The companies that own the Alamo, Avis, Budget, Enterprise and National rental car chains said they were removing all their cars that fell under the recall. Hertz also said it would temporarily stop renting vehicles involved in the recall.

For the company that runs Avis and Budget, that amounts to 20,000 cars. It stressed that Toyotas made up only a small percentage of its fleet.

Competitors were already rushing to take advantage of Toyota's misfortune. General Motors said it planned to offer Toyota drivers deals on its Chevrolet, GMC, Buick and Cadillac cars and trucks. And Toyota will almost certainly face lawsuits.

The recall and sales are another blow to battered automakers, and a bruise for the image of Toyota, which spent decades building its image as a maker of safe, reliable cars and cultivated a fiercely loyal customer base made up largely of baby boomers.

For years, Toyota has dominated big-name quality studies by groups like Consumer Reports and J.D. Power and Associates, and other automakers sought to emulate the company's production methods.

Now some Toyota drivers are worried about repeats of what happened last month to Michael Teston, a physical therapist from Maunelle, Ark. He was driving a 2006 Toyota 4-Runner - a brand not included in the recall - and pulling into a gas station when the car suddenly lunged forward.

"Fortunately, there was a large pole in front of me and it slammed into a pole," he said. "The back wheels were spinning wildly out of control. The back end was bouncing up and down."

Teston said he put the SUV into park, which disengaged the accelerator and caused the back wheel to stop spinning. He said the dealership ran tests on the vehicle but could not find the problem.

Now he is awaiting further direction from Toyota. Because he refused to drive the vehicle back from the dealership, the dealership arranged to send someone to drop the it off at his house, and it is now sitting in his driveway. He said he has filed complaints with the Arkansas attorney general's office and with NHTSA.

"I was not going to drive it because it is a safety hazard," he said. "I think that Toyota should be ashamed of the way they have handled it and they should be held accountable for what they have done."

Business Leaders Form Regional Air Alliance to Bring Cheaper Fares, Better Connections to Grand Rapids Airport

mLive

If a group of West Michigan business executives have their way, airline flights out of Grand Rapids soon will be cheaper, more abundant and able to connect passengers to anywhere in the world.

That's the goal of the new Regional Air Alliance of West Michigan, an initiative launched today at a press conference in downtown Grand Rapids and led by Dick DeVos. It also includes Meijer Inc. and The Right Place Inc.

"From this point forward, we want to be sure that no one is forced to drive to Chicago or Detroit anymore," said DeVos, president of the Windquest Group, a former gubernatorial candidate and son of Amway co-founder Rich DeVos.

The efforts involve CEOs and company executives from Grand Rapids, Lansing, Kalamazoo and Traverse City who plan to launch an aggressive marketing campaign aimed at keeping airlines already operating out of Gerald R. Ford International Airport, and attracting new low-cost service.

"The cost of flying out of Grand Rapids has been historically higher than it needs to be to compete," DeVos said.

That's because competition for airline service is fierce, said Gerald R. Ford Airport Director James Koslosky.

"There are 200 to 400 similarly situated communities and regions that are literally competing for every airline seat we have landing here at this airport," he said. "Given the current airline economics and given the economy where we are, those are scarce resources."

The problem, he said, is compounded by the fact that all those markets want the same thing -- low fares, international connections and networked domestic service to all of those airports.

And they want that from airlines that have cut capacity and consolidated systems, but still lose money, Koslosky said.

Gerald R. Ford Airport currently commands about 65 percent of passenger travel from a market that includes airports in Lansing, Kalamazoo and Traverse City.

But the airport is still "under served" despite having seven long-established airlines and low-cost carrier Allegiant Airlines, which operates direct flights from point to point and does not fly every day.

"We need a low-fare carrier that serves both leisure and business travelers and goes to a focus city and feeds out of that city to other markets," Koslosky said.

Birgit Klohs, president of the economic development group The Right Place Inc., said when talking to existing or potential customers, the frequency, cost and connectivity of air service is always "90 percent plus" a part of the conversation.

"We are dealing really in a global economy; many of our local companies do business overseas," Klohs said. "We cannot afford not to have world class service in and out of here at prices people can afford."

Made in Northern Michigan

Up North Live

With so much bad economic news these days, we love to get the chance to report on something positive.

Nearly 14 years ago, two people with professional careers came to Northern Michigan wanting a change. So, they decided to open up a pie shop.

And what started as something pretty simple has turned into quite the little empire.

Mike and Denise Busley came to Traverse City from San Diego, California back in 1996.

He was in the aerospace industry and she was in pharmaceutical sales.

But, they wanted to do something different with their lives and being natives of Michigan, they always wanted to move to Traverse city and open up a business...getting their inspiration from a tourist area in California, "There were three pie shops. They're known for apples and people would drive either for day of they'd come up for the weekend and apple pie of some kind was definitely in their car on the way home," said Denise Busley, Co-Founder of The Grand Traverse Pie Company.

That's when Mike got the idea to open the Grand Traverse Pie Company.

From there, they opened stores downstate in Brighton and Okemos.

That's just a little of background of how the company got its beginning.

The business has grown by leaps and bounds since it opened and there are now 17 locations, "All over Michigan. In Indianapolis, Evansville and Terre Haute, Indiana," said Mike Busley, Co-Founder of the Grand Traverse Pie Company.

In 2005, the Busleys along with a business partner, decided to sell Grand Traverse Pie Company franchises, "We thought the Grand Traverse name based on pies with a bakey/cafe setting, wi-fi, warm, comfortable would resonate even in Ann Arbor, Grand Rapids, Midland and Indiana," explained Mike Busley.

Along with being Michigan-based, Grand Traverse Pie Company is also dedicated to using as many Michigan grown farm products as possible....doing their part to help Michigan's economy, "We buy over a million pounds of Michigan agricultural products every year," said Mike Busley.

As with many businesses, Grand Traverse Pie Company's growth began to level off with the economic downturn, but they're still expecting a 12 to 15 percent increase in 2010.

They plan to open one or two more store this year.

Wind-Energy Industry Lost Factory Jobs Despite Stimulus

USA Today

Federal stimulus funds rescued the U.S. wind-power industry from what could have been a disastrous 2009, but it still lost highly sought-after manufacturing jobs, according to a trade association report out Tuesday.

Nationwide, the wind-power industry employs about 85,000 people — the same number as a year ago after it gained 13,000 manufacturing jobs in 2008, says Denise Bode, CEO of the American Wind Energy Association.

Early last year, the association had expected wind-power development to drop 50% in year-end levels compared with 2008, given the dearth of financing for wind-farm projects.

But 2009 federal stimulus dollars, reaching $2.25 billion for dozens of wind projects and wind turbine-component manufacturers, buffeted the recession's impact, Bode says.

"The stimulus was a real spur to development," she says. "We saved half an industry."

Nationwide, the wind industry last year added a record 9,900 megawatts of new generation capacity, enough to power the equivalent of 2.4 million homes, the association says.

Only 38 wind turbine-component manufacturing plants were built or expanded last year, down from 55 in 2008. In addition, several wind-turbine companies announced layoffs last year, including at plants in Minnesota, Pennsylvania and Nebraska.

Bode estimates that the wind industry lost between 1,500 and 2,000 manufacturing jobs last year but gained an equal number in wind-farm construction and maintenance.

Without the stimulus funds, "things would've ground to a halt," says Gary Hardke, president of the San Diego-based Cannon Power Group. It has installed 400 megawatts of wind power in Washington state in the past 18 months and secured $19 million in stimulus funds. Without the funds, the project "would've stalled out," Hardke says.

Manufacturers also suffered because they had big inventory levels last year, Bode says. Over the longer term, wind-turbine makers have expressed reluctance to build plants in the USA because it lacks a national standard to increase the use of renewable energy sources, Bode says. Legislation in Congress has proposed the United States get 15% to 20% of its energy from renewable sources by 2020, along with increased efficiencies. On the local level, 29 states have their own requirements to get more of their energy from renewable sources, and six states have set goals.

The nation's wind industry provides about 2% of the USA's electricity. That could rise to 20% in the eastern USA by 2024 if enough money is invested in transmission lines and the power grid, said a study recently released by the Department of Energy.

Rise in Michigan Venture Capital Expected in 2010

Detroit Free Press

As expected, data released Thursday show venture capital investment in Michigan companies plunged in 2009, but more money is expected to flow to promising businesses in the state this year.

In 2009, venture capital firms invested $130.6 million in 33 Michigan companies, about half the $251.4-million investment they made in 45 state firms in 2008.

The figures come from the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

Nationwide, venture capital activity also declined because of the financial crisis, with $17.7 billion invested in 2,795 companies. That's off 37% from the $28 billion poured into 3,985 businesses in 2008.

Among the states, Michigan ranked 19th for venture capital investment last year, falling from its 16th spot in 2008.

Last year, Danotek Motion Technologies, a Canton-based alternative energy company, garnered the most venture dollars in Michigan, attracting $13.2 million.

Following close behind were the pharmaceutical firms Lycera, which received $12.9 million, and NanoBio of Ann Arbor, which obtained $10 million. Lycera recently moved its headquarters to Cambridge, Mass., from Plymouth.

Though Michigan has met with some success in growing its small venture capital industry, the state's increasing number of start-up firms are still having a tough time getting the capital they need.

Mina Patel Sooch, president of the Michigan Venture Capital Association and founder of Apjohn Ventures in Kalamazoo, expects conditions will improve this year, with more dollars flowing into local venture capital firms.

She also anticipates that a larger number of venture-backed Michigan companies will be sold or go public.

"We all think the market is opening up a little bit," Sooch said.

Michigan Businesses in the News

The Detroit Free Press

Locations

• Belle Tire, a tire dealer and windshield replacement and repair company, opened its 82nd store at 2261 N. Telegraph in Monroe. The 9,800-square-foot store features state-of-the-art tire and wheel service equipment in 12 service bays.

• The Auburn Hills CPA, firm of Fenner, Melstrom & Dooling moved its headquarters to downtown Birmingham. The firm is renovating more than 14,000 square feet of space in the building at 355 S. Old Woodward.

• Atlas Oil, a petroleum products distributor and service provider headquartered in Taylor, opened a regional office in Niles. The office will be staffed by 12 Atlas team members in support of new and existing business operations throughout southwest Michigan and northern Indiana. The 2,400-square-foot facility is at 1001 Fulkerson Road.

Partnerships

• Birmingham-based Coldwell Banker Weir Manuel, a real estate broker with 11 offices and more than 400 real estate agents in southeast Michigan, has partnered with Farmington Hills-based Attorneys Title Agency to form Bankers Title Agency. ATA has 18 offices and more than 400 employees statewide.

• Birmingham-based Harris Marketing Group, a sales and marketing firm, partnered with ALTe, an engineering and technology company, to provide public relations services and expertise.

• Better Made Snack Foods is a corporate sponsor of the Detroit Red Wings. The company signed a three-year agreement to provide regular and BBQ-flavored chips to be sold at Joe Louis Arena concession stands for all Red Wings home games and other events at the arena The products are also to be available in all suites.

• Michigan Orthopedic Services, headquartered in Livonia, has added Physicians Health Plan of Mid-Michigan to its list of insurance payers. As of Dec. 1, 2009, MOS is able to provide care to PHPMM patients for their prosthetic and custom foot orthotics needs.

Clayson Hired by Business Leaders for Michigan

Detroit Free Press

He'll helm Detroit Creative Corridor Center

Business Leaders for Michigan today announced it has hired Matthew Clayson, formerly of ePrize, as director of its Detroit Creative Corridor Center.

The group, formerly known as Detroit Renaissance, established the new directorship to advance its Road to Renaissance Creative Economy Initiative. In this role, Clayson will help foster stronger business programs and services for firms in design, advertising, public relations, and other fields requiring intellectual capital and creative drive.

Among other goals, he will recruit business mentors for creative entrepreneurs and organize events and networking activities.

Before joining Business Leaders for Michigan, Clayson was promotion manager for ePrize’s Legal Department, and, prior to that, served as project manager for the Tourism Economic Development Council, helping to strengthen Detroit’s image for Super Bowl XL.

"I look forward to working with various stakeholders to create an environment where creative sector businesses and creative industry flourish in Detroit and Southeast Michigan," Clayson said.

Matt Clayson on Reliable Mass Transit in Metro Detroit:

Detroit News Owner Files Bankruptcy

AP

The owner of The Denver Post, San Jose Mercury News and 52 other daily newspapers filed for bankruptcy protection Friday, joining the procession of publishers choking on too much debt.

The filing by Affiliated Media Inc., the holding company of MediaNews Group, was expected. The privately held company had said Jan. 15 that it would seek to reorganize its finances in bankruptcy court.

MediaNews, based in Denver, says its newspapers and 8,700 employees won't be affected during the bankruptcy proceedings.

Affiliated Media worked with its major lenders and shareholders to hammer out a plan aimed at shortening the company's stay in federal bankruptcy court in Delaware. Affiliated hopes to emerge from bankruptcy protection within a month or two.

The plan calls for Affiliated Media's debt to fall to $179 million from $930 million, according to a person familiar with some of the additional bankruptcy documents expected to be filed late Friday. This person wasn't authorized to discuss them before they were filed.

In exchange for this $751 million concession, a group of lenders led by Bank of America become the company's majority owners with 88 percent of the stock. The remaining 12 percent goes to MediaNews' management team, which is led by William Dean Singleton, who is also chairman of The Associated Press. The MediaNews executives will receive warrants that eventually could boost their combined stakes to 20 percent.

Heading into the bankruptcy filing, Singleton held a roughly 30 percent stake in Affiliated.

Richard Scudder, who co-founded MediaNews with Singleton in 1985, will relinquish his interests in the company to the lenders.

Singleton will also continue to run MediaNews, signaling the lenders remain confident in him despite the company's recent struggles.

The decision probably stems from Singleton's reputation as a hard-nosed businessman who has never shied away from cutting costs, said Alan Mutter, a former newspaper editor who blogs on the media business.

"Who do we know who can go in and run the hell out of a newspaper and make a buck?" he said. "The only answer is William Dean Singleton."

MediaNews spokesman Seth Faison declined to comment Friday.

Despite MediaNews' troubles, Singleton says all but one of the company's newspapers are profitable. He hasn't identified which one is losing money.

"By aggressively facing the challenges of the newspaper business, we will continue to deliver high-quality journalism and will prepare our newspapers for a promising future," Singleton said in a statement Friday.

Apparently, not even Singleton could figure out a way to deal with all the debt that MediaNews took on to expand into new markets. Like other publishers, Singleton borrowed heavily before the Internet and recent recession began to devour the newspaper's main source of income - advertising.

Last year was particularly hard on big newspapers as the industry's print ad sales plunged by nearly 30 percent. Some of the revenue is expected to return as the economy bounces back, but much of it is expected to remain on the Internet, where many marketers are finding they can generate more sales for less money.

At least 14 U.S. newspaper publishers have now filed for bankruptcy protection in the past 13 months.

"What (Singleton) did was what everyone else did - make acquisitions not knowing that in 18 months they'd see a 30 percent decline in advertising and then run out of options," said newspaper analyst Edward Atorino of Benchmark Co.

Affiliated's annual revenue has fallen by $270 million, or 20 percent, during the past two fiscal years. The erosion pared Affiliated's revenue to $1.06 billion in fiscal 2009, which ended June 30.

Another major newspaper publisher, Hearst Corp., is one of the biggest losers in Affiliated's reorganization.

The plan calls for Hearst to lose the roughly 30 percent stake it held in MediaNews' newspapers outside the San Francisco Bay area.

Hearst got its MediaNews stock as part of a complicated deal to acquire The Monterey County Herald and St. Paul Pioneer Press from McClatchy Co. in 2006. Hearst invested $317.3 million in MediaNews, which then bought the two newspapers and the Torrance Daily Breeze from Hearst.

Although the bankruptcy documents don't say it directly, Hearst's holdings clearly weren't worth anywhere close to the $317 million that it paid a few years ago. Affiliated Media estimates the market value of its total enterprise at $190 million to $230 million. The company also said it has $53 million in cash.

As part of the bankruptcy case, Hearst will get warrants that could be converted into MediaNews stock in the future, Faison said.

Hearst spokesman Paul Luthringer declined to comment.

About 600 Car Dealers Try to Get Businesses Back

mLive

About 21 percent of the General Motors and Chrysler dealers whose businesses are being shut down by the automakers have filed paperwork appealing the decisions.

Around 600 dealers out of the roughly 2,800 whose franchises were revoked last year have asked for arbitration hearings in an effort to get their franchises back. Dealers have until midnight Monday to file for arbitration.

The appeals mean that many neighborhood showrooms that were shut down or scheduled for closure could return to business. GM Chairman and CEO Ed Whitacre Jr. has said he expects hundreds of dealers to win their franchises back during the process, which must be wrapped up by June 14.

GM and Chrysler decided to shed dealerships during severe financial problems that plunged them into bankruptcy protection last summer. While GM has told about 2,000 Chevrolet, GMC, Buick and Cadillac dealers that they will be phased out by October, about 700 will stay open because the automaker has not taken away all of their brands. Chrysler already has revoked 789 Chrysler, Dodge and Jeep franchises. Both companies said the doomed dealerships weren't profitable, were too close to other dealers or were in areas where buyers no longer live or shop.

The dealer appeals are being filed under a federal law passed in December that appointed the American Arbitration Association to handle the claims. Arbitrators will consider a dealership's profitability, the manufacturer's business plan, the dealership's economic viability, and whether the dealer met objectives outlined by the automaker.

Congress passed the law after dealers complained that businesses run by their families for generations were taken away unfairly.

India Johnson, an association senior vice president who is in charge of the hearings, said she expects 700 to 800 dealers to seek binding arbitration.

But not all will get hearings, she said. Some filed paperwork to preserve their right to appeal but may not proceed, while other dealers may settle with the automakers before arbitration hearings, she said.

The arbitration hearings, which must be conducted in the dealership's home state, are likely to cost both sides a lot of money. Some dealers may lack money to pursue arbitration because they've closed their businesses or aren't making as much as they once did.

Mike Wolf, who is appealing Chrysler's decision to cut his family's Chrysler-Jeep dealership in Plymouth, Wis., near Green Bay, says the state dealership association told him to expect legal costs of $25,000 to $75,000.

It's a gamble for dealers whose franchise agreements alone are worth anywhere from $500,000 to more than $2 million, Wolf said.

Dealers and automakers also have to split the cost of the arbitrator, meeting rooms and fees. Both GM and Chrysler have received government aid, part of which could be spent on the appeals.

The nonprofit arbitration association will do all it can to keep costs down, Johnson said. In some cases, dealers may represent themselves without an attorney, and others may request arbitrators that will cut their hourly rates, she said.

Chrysler CEO Sergio Marchionne has said the automaker may challenge the constitutionality of the arbitration law in federal court. Spokeswoman Kathy Graham said Thursday that the company has not decided whether to go to court.

Graham said Chrysler already has had to hire people to handle the paperwork, and it likely will need teams of lawyers and company officials to attend multiple hearings on the same day in different states.

Several dealers also are challenging the closures in court under state franchise laws that make it difficult for automakers to cut franchises.

GM plans to have about 4,100 Buick, Chevrolet, GMC and Cadillac dealers in the future. Chrysler had 2,352 dealerships remaining at the end of December.

2.3 Million Toyotas Recalled Due To Acceleration Failure

Detroit Free Press

WASHINGTON – Toyota said today it was recalling 2.3 million vehicles to fix accelerator pedals that could fail to spring back, raising the total number of Toyota models called back for possible uncontrolled acceleration to 4.8 million.

The move reignites questions surrounding sudden acceleration in Toyota vehicles which have been linked to a dozen deaths and more than 100 complaints to federal regulators.

The Japanese automaker last year recalled 4.2 million Toyota and Lexus models over problems with floor mats causing stuck accelerator pedals.

Toyota said the new problem could occur without any floor mat in place. The automaker does not have a fix for the problem at the moment, and warns customers to hold down the brakes if their accelerator pedals become stuck.

About 1.7 million Toyotas are subject to both recalls.

Irv Miller, group vice president for Toyota’s U.S. sales arm, said the company had investigated “isolated reports” of sticking pedals in recent months due to wear.

“Our investigation indicates that there is a possibility that certain accelerator pedal mechanisms may, in rare instances, mechanically stick in a partially depressed position or return slowly to the idle position,” he said.

Toyota said the voluntary recall covers the following models:

• 2009-2010 RAV4,

• 2009-2010 Corolla

• 2009-2010 Matrix

• 2005-2010 Avalon

• 2007-2010 Camry

• 2010 Highlander

• 2007-2010 Tundra

• 2008-2010 Sequoia

For its previous problem, Toyota had begun modifying the accelerator pedals in the all affected models. It had also ordered dealers to modify the floor around the pedals in some models, and install a brake override system meant to ensure that the engine will lose power if the brake and the accelerator are applied simultaneously.

MI Group: Slash Business Taxes, Expand Sales Tax

ABC News

A group of Michigan business executives said Wednesday it's encouraging lawmakers to begin looking at restructuring taxes and improving the state's business climate this year.

Business Leaders for Michigan would like to slice the state's main business tax roughly in half. The lost money would be replaced by extending the state sales tax to a host of services, while dropping the sales tax rate from 6 percent to 5.5 percent.

The group also wants to reduce the size of the state government work force by 5 percent to 10 percent, shrink employee benefits and eliminate a 3 percent pay increase for most state workers set to take effect Oct. 1. State employees got no pay increase two years ago and a 1 percent raise last fall.

Group leaders said the proposed changes are painful but necessary.

"We're in a situation where Michigan is going to have to take some bold steps," said David Joos, CEO of CMS Energy. "We've got to make some changes."

The suggestions, first unveiled last September, are among the ideas being floated by a number of groups as Michigan looks for ways to deal with a deficit that could be at least $1.6 billion when federal recovery money largely disappears. State coffers also will see the drainage of hundreds of millions of dollars in tax breaks.

The outlook for 2010 is a pattern seen often in recent years, as the state has struggled to make spending and falling revenue match up. Democratic Gov. Jennifer Granholm, Democrats who run the House and Republicans who lead the Senate have settled on patchwork, temporary budget fixes mainly because they haven't been able to agree on longer-term solutions.

That has left the 2010-2011 budget mess unresolved entering a key election year when Michigan voters will pick a new governor and every one of the Legislature's 148 seats are up for grabs.

Groups such as Business Leaders for Michigan are starting to insist that solving the state's budget problems shouldn't wait for new officials to take office in 2011.

"It's a political year," said Doug Rothwell, Business Leaders for Michigan president. "It's an election year. We all realize that. But we can't afford to wait."

The group of 75 business and university leaders says the state can't just focus on cutting spending or increasing revenue. It also must remove barriers so school districts and local governments can save money by sharing more services, require public employees to pay a larger share of health care costs and change the way the state's criminal justice system works so prison costs can be brought down.

The group says its plan, which would eliminate the 22 percent surcharge on the state's corporate business tax and then reduce the overall business tax rate, would be revenue-neutral this year. But the state likely would collect more money from the sales tax in subsequent years.

Michigan could become more attractive for corporations if the business tax were reduced.

Other groups have suggested letting voters decide this year if they support a switch to a graduated income tax rather than the flat rate Michigan now has. The tax would be designed to bring in more revenue.

Granholm hasn't signed on yet to any particular plan, but she said last month in her year-end interview that she would support a "grand bargain" to revamp Michigan's tax structure if enough Republicans, Democrats and other groups are on board.

Just how far the governor is willing to go could be evident when she delivers her annual State of the State address Feb. 3 and delivers her proposed 2010-2011 budget to lawmakers a week later.

Home Sales Improving In Metro Detroit

Click on Detroit

FARMINGTON HILLS, Mich. -- The year 2009 ended on a hopeful note for home sales in parts of metro Detroit.

The multiple listing service Realcomp II Ltd. reported sales in December compared to the same month in 2008.

In the southeast Michigan area that includes greater Detroit and the Thumb area, it reported sales were up 10.5 percent in December.

Home sales in Oakland County rose 23.4 percent and were up 35.3 percent in Macomb County.

In Wayne County, sales in December were down 8 percent from a year ago and in Detroit, the sale of homes declined 38.7 percent.

Home sales in Oakland County are getting a boost from a program offered by the county's Economic Development and Community Affairs department.

The Oakland County Home Buyers Program makes money available for qualified lower-income residents to purchase a foreclosed home.

Home buyers with incomes at or below 50 percent of the area median income who also have a good credit rating and meet other requirements can qualify for the program.

It allows home buyers to obtain financing for 51 percent of a foreclosed property with the county providing the remaining 49 percent of the costs plus money for improvements.

Repayment to the county is deferred until property ownership changes.

Kalamazoo Area Housing Sales Increase for Third Month

mLive

The Greater Kalamazoo Association of Realtors saw the number of homes sold in December improve from December 2008, continuing a trend from October and November.

December sales of 258 homes were 9 percent higher than the same month a year earlier. Similarly, sales in November 2009 were up 22.3 percent from November 2008.

“Following a strong fourth quarter in terms of residential units sold, GKAR leadership has deemed 2009 a year of economic recovery from a local real estate standpoint," GKAR CEO Frank Mortl said in a statement. “With an eye towards raising the market value of local homes to their true levels, our association is cautiously optimistic that 2010 will be a year of growth. Improved stock market performance, the need for business to replenish inventories, and the continuing impact of the federal government’s stimulus efforts are all playing a role in boosting the economy both locally and nationally.”

However, home values remain depressed, due to the amount of distressed sales still in the market. The average residential selling price for the area fell 10.7 percent from December 2008 to $117,581. Total dollar volume of residential sales fell 1.5 percent to $30.4 million, compared to $30.8 million at the end of last year, the association reported.

Once home prices stabilize and begin to improve, Mortl expects consumer spending to increase. Relative to the 12.9 percent national price decline in 2009, he expects local home prices to grow in the near future.

"Traditionally, as consumer confidence rises due to a stronger economy, home values are directly affected in a positive way," Mortl said. "Hopefully, the recession is firmly behind us, and local Realtors will continue servicing homebuyers and homesellers at these increased levels with solid home valuation growth along the way.”

Turning Asian Carp From Disaster Into Dinner

LA Times

Reporting from Chicago - Asian carp may indeed be poised to destroy commercial fishing as we know it in the Great Lakes, but Reggie McLeod likes his smoked or pickled.

The Vietnamese community cooks carp in coconut milk with lemongrass and chili peppers. The Polish like to draw out the pungent fishy odor by soaking it in milk and onions.

At Joe Tess Place in Omaha, Neb., which has proudly served deep-fried carp sandwiches since the 1930s, it's presented on rye bread with fries and handmade coleslaw.

The humble Asian carp, which by some accounts is now within six miles of Lake Michigan, didn't ask to be at the center of a legal and political firestorm. But in a short time, this scaly bottom feeder has attracted the attention of the White House and the U.S. Supreme Court, which is considering whether to force Illinois to close locks and dams in Chicago-area waterways to keep the carp out of the Great Lakes.

There's no question this ugly, stinky fish has an image problem in the United States. But so many varieties of carp, including the feared Asian carp, have been popular in ethnic cuisines for so long that some can't help but see Illinois' current crisis as the culinary opportunity of a lifetime.

"The only thing wrong with eating Asian carp is that it has the word carp in it," said Steve McNitt, sales manager at Schafer Fisheries in Thomson, Ill., one of the largest carp processors and distributors in the country. "It's a tasty fish, a fleshy fish. Think of all the hungry people around the world you could feed with carp.

"We shouldn't be trying to eradicate it; it's too late for that. We should be eating it."

Since escaping from government fish hatcheries and catfish ponds in the South during the 1970s, Asian carp have made their steady and dramatic way up the Mississippi River toward the Great Lakes.

Feeding on vegetation and plankton, Asian carp -- a term that actually encompasses four varieties of carp -- are fast, prolific breeders that can weigh up to 100 pounds and eat several times their body weight a day.

Some estimate there are tens of millions of pounds of harvestable Asian carp in the Illinois River -- a tantalizing prospect for anglers and entrepreneurs hoping to cash in on a slimy, silvery gold rush.

Schafer Fisheries alone processes about 12 million pounds of carp a year from a 30,000-square-foot facility near the banks of the Mississippi River, across from Iowa. Nearly 10 million pounds are shipped to China, Japan, Canada and Europe, McNitt said. The rest is sent to restaurants and ethnic grocery markets in Los Angeles, New York City and Chicago.

Bighead carp, a variety of Asian carp, arrives twice a week at markets such as Mayflower grocery in Chicago's Chinatown, where it sits amid the imported salted mackerel and the dried octopus.

At a Vietnamese supermarket in the Uptown neighborhood, bighead carp is sliced thin and wrapped in cellophane for $2.19 a pound.

Customers can buy whole carp or just the heads at Rubino's Seafood Co., a wholesale fish distributor, which sold about 15,000 pounds of it over the holidays. Co-owner Ron Caminiti said the carp has two crucial obstacles to wider culinary acceptance: bones and a bad rap.

"It tastes good, but it's very bony, and most Americans don't like that," Caminiti said. "My Polish customers? They love it. But anything Americans have to eat so gingerly isn't going to become popular."

McNitt agreed. "As soon as you tell them it's carp, it's over," he said.

When it comes to fish, name and reputation go a long way, industry experts say. Chilean sea bass was not so popular when it went by its original name, Patagonia toothfish.

Similarly, many Chinese won't eat carp known to have lived in rivers, said Z.J. Tong of the Chicago Chinese Cultural Institute, but they will happily fry up those from lakes or fish farms. Tong's family in northern China sautes carp with garlic, ginger, onions and other spices.

Reggie McLeod, who edits and publishes a small, Minnesota-based magazine dedicated to the upper reaches of the Mississippi River, said carp suffers from "a cultural bias" in the United States. The fish looks terrible, and it smells bad, but it has a subtle, moist flavor that is surprising -- provided all the bones are removed.

"My dad always told me [carp] was inedible," McLeod said. "But I have fished a lot and eaten a lot of fish, and carp has a very mild taste that I really like."

McLeod became so taken with the smoked and pickled varieties his friends offered him that his publication, Big River Magazine, sponsored a contest last year asking every chef, angler and fish-lover in Minnesota, Iowa and western Illinois to submit their favorite carp recipes to be judged by the magazine.

"No one entered," he said, somewhat deflated. "I guess we have a way to go still before it catches on."

With all the recent buzz about Asian carp, though, McLeod said he planned to relaunch the recipe contest this year.

Schafer Fisheries thought so much of Asian carp in 2006 that it entered talks with lawmakers in Springfield to cultivate carp meat to feed prisoners at the nearby Thomson Correctional Center and other state prisons. However, the response was tepid, McNitt said.

Caminiti, no fan of carp himself, said the fish's only chance at the mainstream is if a celebrity chef takes pity on it.

"You get some fancy chef to throw a sauce on it and charge $25, people will buy it," Caminiti said. "But it'll never happen."

Round-the-Clock Car Factories in China Still Can't Fulfill Drivers' Demand

Bloomberg

Nissan Motor Co.’s factory in central China is making cars almost 24 hours a day, yet Pan Xiaowei still waited three months for her new Tiida compact to arrive at the dealership.

“It wasn’t like this a couple of years ago,” said Pan, 34, whose husband runs a property development company in Shandong province. “We used to buy and get a car straight away, and now you have to pre-order and wait.”

China overtook the U.S. last year as the world’s largest automobile market with sales surging 46 percent to 13.6 million, according to the China Association of Automobile Manufacturers. Nissan, Ford Motor Co. and Honda Motor Co. are running their Chinese factories at full capacity, with overtime and weekend shifts, and still can’t deliver enough cars.

“Based on our current growth rate and planning assumptions, the capacity of our two facilities will not be able to accommodate the expected future demand for our products,” Nigel Harris, general manager of Ford’s venture with Chongqing Changan Automobile Co., said in an e-mail.

About 99.7 percent of cars made in China through November last year were sold, the association said. Foreign automakers are expanding assembly lines as buyers in secondary cities beyond Beijing and Shanghai benefit from government subsidies of at least 5 billion yuan ($732.5 million), a sales tax cut and 8.9 percent economic growth.

Rural Consumption

Car sales have been fueled by demand in rural areas where the growth rate exceeded that of urban regions last year for the first time, Trade Minister Chen Deming said in a Jan. 13 interview with state broadcaster CCTV.

“Spending power in the medium and small cities is rising, and demand there has surpassed those in bigger cities,” said Wei Tuo, a Henan province dealer for Nissan’s joint venture with Wuhan-based Dongfeng Motor Group Co. “Cars are no longer considered a luxury item but a standard consumer product.”

Wei’s company has about 40 outlets in the central region selling several brands. About 55-60 percent of sales come from middle- and small-sized cities, he said.

Nissan is the No. 1 Japanese automaker in China, with last year’s sales rising 39 percent to 756,000, outselling Toyota Motor Corp. and Honda, according to the three companies. Nissan’s top seller is the Teana.

Running Almost 24 Hours

Nissan is spending 5 billion yuan to expand its Hubei province plant to build up to 600,000 vehicles annually from the current 430,000, spokeswoman Kana Minamidate said. That central China factory makes the Tiida compact and Livina series popular in secondary markets, she said.

“The plant was originally operating with two shifts but now we have three shifts to build cars almost 24 hours a day,” Minamidate said, adding that customers still wait for deliveries.

Nissan also is spending 1 billion yuan on a light- commercial vehicle factory in the eastern city of Zhengzhou that will open this year and build up to 120,000 vehicles annually.

China requires overseas carmakers to work with local partners, who must own at least 50 percent of joint ventures. These ventures produced eight of the 10 best-selling cars last year, according to automobile association data.

Changan Ford Mazda Automobile Co. has plants in Chongqing and Nanjing building cars “at maximum allowable overtime and weekends,” Harris said. The company will open a $490 million factory in Chongqing in 2012 making up to 150,000 vehicles a year, boosting overall capacity to 600,000.

‘More Traffic Jams’

Near-term growth will be concentrated in eastern and central regions, and cities outside Beijing, Guangzhou, Shanghai and Shenzhen, Harris said. The venture opened more than 65 percent of its new dealerships last year in smaller cities, and that proportion is expected to reach 75 percent in the next few years.

“There are more traffic jams in Chengdu than in Beijing,” said Zheng Minda, vice general manager of a Ford dealership in the Sichuan province city. “Demand is greater than supply.”

Customers wait at least a month for delivery, he said.

The government unveiled stimulus packages and new bank lending to spur domestic consumption after GDP growth slumped for eight straight quarters and exports declined for 14 months as the global recession took hold.

Still, automakers face possible overcapacity in China, according to Chen Bin, who oversees regulation of the country’s auto industry at the National Development and Reform Commission.

China has more than 100 automakers and they should “keep their heads cool” to prevent expanding production beyond demand, Chen said in September.

Income Gap

Urban residents earn about three times more than rural, who comprise more than half of China’s 1.3 billion people, according to government statistics.

Rural Chinese buying a new minivan or light truck can get a subsidy of 10 percent of the purchase price, up to 5,000 yuan. Those replacing light trucks can get another 5,000-18,000 yuan.

The government also reduced the sales tax on new vehicles with engines of 1.6 liters or smaller to 5 percent from 10 percent. It said Dec. 10 it was raising the rate to 7.5 percent.

Honda, which opened 55 dealerships mostly in small cities last year, is focusing expansion in suburbs and exurbs of major cities, said Masayuki Igarashi, general manager of its China operations office in Tokyo. Its best-selling model is the Accord.

Chief Financial Officer Yoichi Hojo said in November that the company, which makes about 550,000 cars a year in China, doesn’t have enough capacity. The Yokohama, Japan-based automaker plans to increase production at its Hubei province plant to 240,000 cars this year from 200,000.

The Wuhan factory runs at full capacity and built 210,000 units last year with overtime and weekend shifts, Honda spokesman Yoshiyuki Kuroda said. It makes CR-Vs, Civics and Accords, and wait times are at least a month, he said.

Pan, who lives between Beijing and Shanghai, said a lot of Chinese households now own two cars.

“It used to be that only company bosses could afford a car, but now teachers and office workers can also buy one,” she said.

Henry Ford Raising Wages May Give China Tips on Creating Worker Prosperity‏

Bloomberg

Jennifer Granholm works on her resume while Michigan's union jobs get shipped to China.

“Little” Xie says he wants to own one of the autos he helps build at Ford Motor Co.’s assembly plant in the Yangtze River city of Chongqing. With his mortgage payment taking about 60 percent of his 2,000 yuan monthly pay, that won’t happen soon.

“It isn’t even worth talking about company incentives to help buy a car, since I can’t afford one in the first place,” said Xie, 28, a six-year Ford employee, as he approached the factory gates for his night shift. Xie, whose nickname comes from his youthful age, asked that his full name not be used.

Higher wages for people like Xie would help resolve China’s biggest economic challenge: shifting away from growth fueled by exports and investment and moving toward an economy driven more by domestic consumers. China’s communist leaders might learn a lesson about how to create a more prosperous working class from American industrialist Henry Ford.

The founder of the auto manufacturer that bears his name generated headlines around the world in January 1914 by doubling the average autoworker’s pay to $5 a day. The move made Ford’s Model T more affordable, created a more stable workforce and helped stoke the growth of the U.S. middle class, according to Bob Kreipke, the historian for the Dearborn, Michigan-based company.

“This allowed people to increase their buying power and, at the same time, they produced a better product,” Kreipke said.

Consumer Culture

Low wages in the world’s third-largest economy are slowing the rise of a consumer culture that Premier Wen Jiabao and President Hu Jintao have said China needs to maintain expansion at the 8 percent a year that will generate jobs for its 1.3 billion people. The current growth pattern is “unsustainable,” Wen said Dec. 27.

That hasn’t stopped China’s auto industry from booming, with sales last year of 13.6 million vehicles, eclipsing the U.S. as the world’s top market for the first time, according to figures from the China Association of Automobile Manufacturers in Beijing. The surge in purchases was spurred partly by government subsidies to help farmers buy autos.

Encouraging higher pay might help sustain the boom and boost consumption, which currently accounts for about 35 percent of China’s gross domestic product, compared with 70 percent in the U.S. It would also help ease income gaps between the rich and poor, which are higher than those in South Korea and Taiwan at similar stages of development and have led to riots and other labor unrest.

Buying Power

Ford’s $5 daily pay allowed an employee to buy a Model T that cost $440 with the equivalent of about four months’ wages. Chinese factory workers averaged 24,192 yuan ($3,544) a year in 2008, according to figures from the National Bureau of Statistics in Beijing, so it would take more than three years worth of wages for them to afford the cheapest car advertised on the company’s Chinese-language Web site: a four-door hatchback with a 1.3 liter engine listed for 78,900 yuan.

While the auto company declined to comment on worker pay, Ellen Hughes-Cromwick, Ford’s chief economist, said Ford projects growth 10 years into the future for the countries where it operates, and it sees China’s economy in a period of expansion characterized by rapid rises in employee compensation similar to South Korea’s economy starting in the 1960s.

“We are at a situation where wages are moving up and doubling in a very short period of time,” Hughes-Cromwick said in a telephone interview from Dearborn. “We do expect takeoff to generate pretty substantial wage gains.”

Boost Pay

One way China’s government might help boost pay would be to raise the value of the yuan, said Nicholas Lardy, who studies the Chinese economy as a senior fellow at the Peterson Institute for International Economics in Washington.

U.S. and European officials have said China keeps the yuan artificially low to boost sales in foreign markets. An undervalued currency encourages manufactured exports at the expense of developing the more labor-intensive service sector, depressing job growth and keeping wages low, Lardy said.

“Appreciation would lead to more rapid growth in the demand for labor and thus to more employment growth and more wage growth,” he said.

China should also spend more on education for peasants and migrants to raise their skill levels and employment prospects, said Xiao Geng, director of the Brookings-Tsinghua Center for Public Policy in Beijing.

Rural Migrants

Henry Ford employed some of the millions of eastern European immigrants who poured into the U.S. a century ago, as well as migrants from the South and Midwest lured by high wages. China’s leaders must deal with hundreds of millions of rural laborers coming to cities, who put downward pressure on salaries.

“Unskilled workers are condemned for generations to low wages,” Xiao said.

Even a skilled worker like Gong -- who also asked that his full name not be used -- said he makes only 6 yuan ($0.88) an hour as a welder at Ford’s Chongqing plant, 9 yuan an hour for overtime.

“I have a dream of someday buying a car,” said Gong, 29, as he walked home in the rain after a 10-hour shift. “I guess it will take six years of saving.”

Illinois Officials Present United Front Against Lawsuit, Carp

NY Times

Federal and state officials from Illinois on Tuesday defended their efforts to ward off Asian carp, a voracious, nonnative fish that could threaten the ecosystem of the Great Lakes, even as they reported new evidence that the fish may be near Lake Michigan.

Facing a legal challenge over the issue from Michigan, which is demanding the closing of Chicago-area waterways that lead to the lakes, the leaders from Illinois met at an aquarium beside Lake Michigan and sought to present a united front.

Senator Richard J. Durbin, Democrat of Illinois, said that closing the waterways, where signs of the carp have been found, could cause economic problems for the shipping software industry as well as flood thousands of homes.

“We are not in denial about the threat of this invasive species,” Mr. Durbin said. “The purpose of this meeting is to make it clear that we are doing things proactively, and we will continue to.”

Still, during the meeting on Tuesday, officials from the Army Corps of Engineers acknowledged that genetic material from the Asian carp had been found in a channel beyond an elaborate barrier system that was designed to stop their journey north through the Mississippi River system and into the Great Lakes. Traces of the fish were found in samples gathered in October at a pumping station in Wilmette, Ill., a suburb north of Chicago that is not far from Lake Michigan, officials said.

That marked the second time genetic material from the carp was discovered beyond the barrier. The first finding, in a canal south of Chicago, was announced in November. Live fish have yet to be discovered past the barrier. The barrier system, which acts like a powerful electric fence, has been a major part of efforts since 2002 to prevent the spread of the carp, a big, hungry fish that, scientists say, can take over an ecosystem by eating the plankton needed by native species.

“This has been an urgent situation for a number of years that has evolved into an imminent crisis,” said Henry Henderson, the director of the Midwest program for the Natural Resources Defense Council. He called the response at Tuesday’s meeting “surprisingly lackadaisical.”

In December, the State of Michigan filed a lawsuit against the State of Illinois. Other Great Lakes states, including Minnesota, New York, Ohio and Wisconsin, and the Canadian province of Ontario have supported Michigan’s effort. Among other things, Michigan has called for an injunction to close the locks along the Chicago-area waterways. The Supreme Court is scheduled to consider the issue during a private conference on Friday.

Michigan’s attorney general, Mike Cox, a Republican who is running for governor, said he was disappointed that Illinois officials appeared more concerned with local interests than the health of the Great Lakes.

“It is distressing that inaction on the part of a state with only a few miles of shoreline is threatening the economy and ecology of Michigan and every other state in the Great Lakes basin,” Mr. Cox said in a statement.

Senator Durbin said the lawsuit was unhelpful. “Let’s not meet in the courtroom,” he said. “Let’s meet in the halls of Congress to find a way to come up with a solution.”

Ambassador Bridge Owner Offers State Deal on Aid

Detroit Free Press

Already locked in litigation, Ambassador Bridge owner Manuel (Matty) Moroun, and the Michigan Department of Transportation have found yet another issue to disagree on.

That issue is the local match that MDOT must come up with to qualify for federal highway funds. Short of cash, MDOT estimates it will have to forgo $475 million in federal aid for roads and bridges in 2011 because it lacks about $84 million in local matching funds.

Moroun said he can help. Federal law allows MDOT to count private investment in certain projects as the 20% local match for U.S. aid. Moroun said he has invested roughly $400 million in work on his bridge since the 1990s that could qualify. If accepted by U.S. highway authorities, that could bring in about $1.6 billion in federal aid in coming years.

The private investment is known as "toll credits" because the work was done on a tolled bridge. MDOT in the past has used toll credits generated by three publicly owned bridges -- the Blue Water Bridge, the Mackinac Bridge and the International Bridge at Sault Ste. Marie -- to match federal aid to pay for local bus systems and the like.

Toll credits are used widely by other states as well.

But MDOT balks at using Moroun's toll credits. For one thing, MDOT spokesman Bill Shreck said, Moroun has never presented a full accounting of his investment at the bridge -- something he would have to do for his toll credits to qualify as a match for federal aid.

"When they've offered in the past, they've never, ever submitted the forms," he said.

Another problem is that toll credits are "like Monopoly money," Shreck said. They provide a match on paper but don't provide actual cash. So if they triggered the 80% federal funding, MDOT would still be 20% short of full funding for any given project.

There are other disagreements, but the biggest divide is MDOT's support for other bridges that compete -- or would compete -- with the Ambassador Bridge. In a recent interview, Moroun cited MDOT's twinning of the Blue Water Bridge in the 1990s, and its support for the proposed Detroit River International Crossing bridge in southwest Detroit as MDOT's attempts to siphon off up to 75% of Moroun's toll revenue.

Moroun criticized MDOT's role in the DRIC project, a proposed publicly owned bridge less than two miles downstream from the Ambassador Bridge, as "absolutely a tremendous waste of money."

Moroun's position: He'll allow his toll credits to be used as a local match for federal aid only if MDOT promises not to use that money to support competing bridge projects.

"We've said we'll give those to you when you demonstrate that you're not going to use this money against us," said Mickey Blashfield, head of government relations for Moroun.

This disagreement over toll credits takes place against the backdrop of Moroun's years-long feud with MDOT over rival bridge projects. Today, attorneys for MDOT and Moroun are expected to go before Wayne County Circuit Judge Prentis Edwards for a hearing on Moroun's lawsuit that is attempting to block MDOT's participation in DRIC.

Carmine Palombo, director of transportation for the Southeast Michigan Council on Governments, said Moroun and MDOT need to call a truce.

"I have been trying to suggest that they need to sit down and talk because it's just going to escalate," Palombo said. "The state can't afford this, financially or any other which way you look at it."

Saginaw City, County, and Community Schools Sue BCBS of Michigan

mLive

Saginaw County, the city of Saginaw and Saginaw Township Community Schools have filed lawsuits against Blue Cross/Blue Shield of Michigan, claiming the insurer overcharged a total of about $7 million in “secret” fees they say they didn’t know were assessed.

The county has claimed the insurer overcharged it $4 million, while the township schools have estimated the amount reached $1.8 million. Both suits were filed in Saginaw County Circuit Court.

The fees, imposed on the county and the schools in 1994, weren’t disclosed until 2008, court filings said.

Meanwhile, the city of Saginaw is part of a lawsuit filed in Genesee County Circuit Court that seeks more than $1 million against the insurer over the same issue, said William H. Horton, a Troy attorney who represents the city, the county and the township schools.

Lawyers have sought to make that case a class action lawsuit with the Genesee County Road Commission and Tuscola and Cass counties, said Elizabeth A. Favaro, also an attorney for the plaintiffs.

Attorneys argued the city, schools and the county weren’t told of the “secret and hidden fee” added to hospital claims in addition to administrative and “stop loss” fees for catastrophic insurance coverage that were disclosed, Favaro and court records said.

Several Michigan counties have filed lawsuits against the insurer over the same issue, court records said.

Blue Cross/Blue Shield has denied wrongdoing. It said the plaintiffs failed to show evidence they didn’t know of the disputed charge, called an administrative services contract access fee, court records said.

“We’ve also demanded that (Blue Cross) stop charging these (access) fees,” Horton said.

The city, county and the school district are self-insured but use Blue Cross/Blue Shield to manage health insurance premium funds.

The insurer charges the access fee as part of the billed cost to handle the claims, court records said.

“These fees were expressly authorized by the Blue Cross contract,” said Blue Cross spokeswoman Helen Stojic, who added that group savings on hospital claims “year after year” gave the city, school district and the county “substantial savings that far exceed the fees.”

She did not have an exact amount.

“It’s unfortunate that knowing these facts, the groups and their attorneys have chosen to take legal action,” she said. “Despite the legal action, all of the groups continue to do business with us.

“We don’t believe these cases will be successful.”

Deputy County Controller Charles H. Cleaver said keeping Blue Cross to manage the self-insured fund doesn’t mean the county is satisfied.

“If we were happy with that, we wouldn’t file a lawsuit,” he said.

In late December opinions released this week, Saginaw County Circuit Judge Fred L. Borchard ruled against Blue Cross/Blue Shield’s motion to dismiss the county and school district’s lawsuit. Borchard also denied the request of both plaintiffs for an immediate finding of a breach of contract. The judge’s opinion said the contract language on the access fee was “ambiguous,” but he would leave it to a jury to decide if a breach of contract occurred.

Any money that the county might recover would go into an employee health insurance fund, Cleaver said. It’s premature to say how the schools might handle a judgment, Favaro said.

Several Michigan counties have filed lawsuits against the insurer over the same issue, court records said.

In a settlement with Oakland County, Blue Cross/Blue Shield agreed to pay $650,000 and provide three years of free administration of Oakland’s self-insured plan, The Detroit News reported in November. The free administration was worth $8.5 million to the southeast Michigan county, one official estimated.

Daimler’s Smart Car Proves Not So Clever in Size-Obsessed U.S.

Bloomberg

Daimler AG’s two-year effort to win over U.S. drivers with a thrifty, plastic-clad minicar is running out of steam, adding urgency to the German automaker’s effort to find a partner for the Smart brand.

The U.S. debut of the urban two-seater is foundering after a promising start in 2008, when North American sales propelled Smart to its first profit. With just one model, the “ForTwo,” U.S. sales plunged 41 percent to 14,600 cars last year, more than the 15 percent decline by Daimler’s Mercedes-Benz.

“Smart’s not a car in the traditional sense, it’s a high- style alternative to public transportation,” said Jim Hall, principal of consulting firm 2953 Analytics who has worked with General Motors Co. and Toyota Motor Corp. on model development. “The problem for Smart is that fashion tends to be fleeting.”

Smart’s fading fortunes in the U.S. highlight Daimler’s need to find a partner to expand the model lineup and lower costs as it commits $2 billion to boost compact car offerings. The manufacturer is in talks with Renault SA and other carmakers on potential “close-knit” cooperation, Chief Executive Officer Dieter Zetsche said Dec. 17.

“The lack of success in small cars has been a big strategic weakness, and Daimler likely needs a partner to turn things around,” said Stefan Bratzel, director of the automotive institute at the University of Applied Sciences in Bergisch Gladbach, Germany.

Cheaper Alternatives

The brand sputtered with new models, and consumers favored Bayerische Motoren Werke AG’s Mini. There are better-value alternatives to the ForTwo, which starts at $11,900, Hall said.

Smart’s weakening in the U.S. accelerated in the fourth quarter, when sales totaled 2,174, a 66 percent contraction from a year earlier. BMW’s Mini had 10,229 U.S. sales in the period, a decline of 24 percent. In December, Smart sales were lower than GM’s Saab, which is in the process of being closed or sold.

“Smart is very important for Daimler,” Bratzel said. “If you want to survive as a global carmaker, you need small cars because that’s where the growth is, especially in markets such as India and China.”

At the Detroit auto Show today, Smart will introduce a “chrome yellow” special edition and present a car-sharing project piloted in Austin, Texas. The size of the display is unchanged from a year ago.

The Right Stuff

“We still believe the Smart ForTwo is the right car at the right time in the right place,” said Ken Kettenbeil, a Smart USA spokesman.

Penske Automotive Group Inc., the sole Smart distributor in the U.S., moved on Jan. 4 to “reinvigorate” sales by naming Jill Lajdziak as president of Smart USA. The former general manager of GM’s Saturn aims to bolster awareness of the minicar.

“There is a definite ‘wow factor’ when people sit inside the car,” said Kettenbeil. “Many are surprised about the vehicle’s roominess.”

Daimler introduced Smart in Germany in 1998 and brought it to the U.S. 10 years later, achieving 24,662 sales that year. That helped the brand make its first profit, though Smart has never met an original global target of 200,000 deliveries a year.

The top markets are Germany, where sales rose 2 percent last year to 32,400 vehicles, and Italy, where deliveries declined 15 percent to 29,500. Global sales dropped 13 percent to 116,900. Smart sold 1,800 cars last year in China.

Daimler Results

Helped by a tripling of profit at Mercedes-Benz Cars, which includes Smart, Daimler ended a run of three quarterly losses in the third quarter as it targeted annual cost cuts of 5 billion euros ($7.2 billion). Boosted by new Mercedes models, Daimler may post profit of 1.76 billion euros in 2010 after an anticipated loss of 1.91 billion euros in 2009, according to the median estimates of 17 analysts surveyed by Bloomberg.

Daimler said Jan. 8 that a new look for the ForTwo should boost sales in the second half of 2010.

Even so, BMW is selling almost twice as many Minis and increasing production of the car, a retro version of an iconic compact. The Mini has been popularized in movies including the remake of “The Italian Job,” while the Smart appeared in new “Pink Panther” films with Steve Martin.

“It’s very difficult for Smart to duplicate the success of Mini,” said Rebecca Lindland, director of auto research at IHS Global Insight in Lexington, Massachusetts. “The primary characteristic of Smart is that it’s small. The primary characteristic of Mini is that it’s irresistibly adorable, with performance thrown in.”

Test Drives

Daimler expects a publicity boost when it rolls out a limited-series electric Smart in the U.S. and Canada in late 2010, and plans a push to get more drivers to test the ForTwo, similar to a 50-city road show in 2007.

The ForTwo, at 8 feet, 10 inches, is more than three feet shorter than BMW’s Mini. Some Americans are reluctant to buy minicars because they are overshadowed on the road by massive pickups and sport-utility vehicles.

“The car is just so tiny in the U.S.,” said Lindland. “I had a Mini and there were friends of mine who were afraid to drive with me.”

Smart’s U.S. appeal also may be suffering because consumers can choose alternatives like the Hyundai Accent, which seats five people and is more than 12 feet long, with a starting price that’s $2,000 less.

Swatch Venture

Smart began as a joint venture with Swiss watchmaker Swatch Group AG. Daimler took control in 1998 after a disagreement over developing a SwatchMobil model. Daimler is now looking for a partner with expertise in small cars to boost volumes and spread development costs, and aims to make a decision by June.

To improve U.S. prospects, Daimler is considering a four- seat Smart after it refreshes the current model. A previous “ForFour” was canceled in 2006 as part of a restructuring that ended production of a roadster and development of an SUV.

“It’s a tough sell,” said Lindland. “They’ve got to be really hopeful that gas prices increase or regulations change. Without that, consumer behavior isn’t likely to shift in Smart’s favor.”